How long until free to play and in-app purchases are regulated?

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This is going to be a relatively short post, because two other writers have already a lot of my work for me.

Step 1: read Rob Fahey’s editorial on “How to control free-to-play spending?

Step 2: read this Wall Street Journal feature: “Mom, please feed my apps!

Step 3: let’s have a quick chat…

The debate about whether the use and/or marketing of freemium games/in-app purchases/virtual goods is “evil” has been going on for some time (in fact, I was on a panel at the UK Develop conference about this time last year about just that topic – and it wasn’t new then, either).  I’m not going to get into that debate now, save to point out that one of the most prominent aspects of that debate is the argument that the unfettered targeting of children with those kinds of business models and marketing techniques has the potential to be explosive.  I think more people are waking up to this, hence the two smart articles I linked above and hence the decision to write this quick post now.

Why is is potentially explosive?  Because if a game (or other software) is designed in such a way that it encourages its users to pay money, potentially quite a lot of money, in return for little more than transitory enjoyment or other advantages, AND if the majority of those users are children, then parents are going to start getting angry, businesses are going to get sued, and politicians will start getting interested.

The first two (parents getting angry and businesses getting sued) is already happening.  As the two smart articles I linked to above suggest, it’s only a matter of time before the political interest starts up – which will rapidly lead to regulators in key territories (in particular the FTC in the USA and the European Commission in the EU) announcing investigations into it.  Obviously, the when/what/how/why of such investigations could be a whole series of posts in its own right, but the point is that we seem to be slowly reaching a point where these kinds of investigations are possible, even likely.

(In fact, they’re already beginning to happen – look at the Japanese government deciding to regulate the ‘gacha’ virtual goods sales model last month, for example).

Don’t get me wrong: I’m not advocating enforced regulation here, personally.  I think there is the potential for some form of industry wide self-regulation here based on more enlightened working practices as well as a greater willingness to name and shame the few bad apples that spoil the barrel.  Besides, if there’s one thing the games industry can boast of, it’s that it shows how business models and technical innovation can help to reduce legal issues (it’s already doing so for issues like IP infringement, so why not kids’ protection online?)  However, there’s precious little sign of any industry consensus or action that could lead to justified self-regulation.  Until that begins to happen, there will be nothing to stop piecemeal enforced regulation in different countries.

A few last points to think about.

(1) Existing laws in key Western territories already regulate to what extent children can be marketed to online in general terms.  For example, in the USA we have COPPA and in the UK we have a number of different statutes as well as explicit Advertising Standard Authority guidance on targeting children.  That legislation is primarily intended to govern children’s online use generally (i.e. websites) but it wouldn’t be hard for that existing legislation to be applied in a way that causes potentially serious difficulties for games (or other software) that deploy virtual goods, in app purchases, or similar models.

Example: what would happen to the mobile games industry if national governments introduced tough rules requiring that no game targets under-13s except with clear opt-in parental consent and control and rejected any possibility of sell them virtual goods of any kind?

(2) I haven’t even got into the whole topic of consumer protection and in-app purchases and virtual goods (i.e. what do you get for your money?), which readers will know this blog has written about 100 times already.  That clearly is a separate topic and isn’t quite so child-focused: probably less hot politically therefore, but likely to be dragged into all this eventually all the same.

How long before there is a real system shock moment that brings issues like this to a head?  My money is on a landmark class action lawsuit in the States or the European Commission starting up a tough investigation in the next year or so.  Watch this space…

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